Which of the following statements correctly describes the accounting for bonds that were issued at a discount?
A) The market rate of interest is less than the stated interest rate.
B) The interest expense over the life of the bonds will be less than the cash interest payments.
C)The present value of the bonds' future cash flows is greater than the bonds' maturity value.
D)The book value of the bond liability increases when interest payments are made on the due dates.

Question

Quizplus · Accepted Answer

When bonds are issued at a discount, the book value of the bond liability increases over time as the discount is amortized, leading to an increase in the carrying amount of the bonds.

Which of the Following Statements Correctly Describes the Accounting for Bonds